President Barack Obama presses big banks to step up lending to small businesses

Obama says bailed-out institutions should do their part to help revive economy

December 15, 2009|By Jim Puzzanghera, TRIBUNE NEWSPAPERS

WASHINGTON — In President Barack Obama's view, taxpayers helped give the Wall Street executives he recently called "fat-cat bankers" another nine lives with government bailouts.

Now he wants those executives to repay the "extraordinary assistance" by not only returning the money, as many are doing, but with "an extraordinary commitment ... to help rebuild our economy." Specifically, Obama wants the nation's largest banks to lend more money to small businesses -- a message he delivered at a White House meeting Monday.

"Now, no one wants banks making the kinds of risky loans that got us into this situation in the first place," Obama said after the sit-down with executives from Wells Fargo, Bank of America, JPMorgan Chase and seven other banks, with three others joining by phone.

"But given the difficulty businesspeople are having as lending has declined, and given the exceptional assistance banks receive to get them through a difficult time, we expect them to explore every responsible way to help get our economy moving again."

Executives said they got the point. Bank of America pledged to make $5 billion more to small- and medium-size businesses next year. JPMorgan Chase reiterated an announcement it made last month to increase lending in 2010 by as much as $4 billion. And other bankers also promised to do more -- within limits.

"Every bank in that room talked about adding many, many small business originators and setting very aggressive goals for small business lending next year," Richard Davis, chief executive of U.S. Bancorp, said after the meeting.

"We have to find a way to qualify more people and not put ourselves at risk three or four years from now because of actions we took at a moment in time," he added.

The Federal Deposit Insurance Corp. recently reported that bank loans from July 1 to Sept. 30 fell by $210 billion, the biggest drop since it started keeping records in 1984.

But pressuring executives at big banks will not make the problem go away, analysts said. Most loans to small businesses come from community banks, which are feeling increased pressure from regulators not to take too many risks.

And many creditworthy small businesses aren't seeking loans because the deep recession has scared away too many customers.

"A huge part is the demand side, even though Washington says it's a supply-side problem," said William Dunkelberg, chief economist at the National Federation of Independent Business.

Obama said that while bankers complain they can't find enough creditworthy risks, he continues to hear from small firms that say they are creditworthy but can't obtain loans.

Yet he is losing leverage as more banks repay their bailout money.

On Sunday, he used rhetoric to try to pressure banks. Asked about Wall Street firms paying big bonuses to execs, Obama told CBS' "60 Minutes" that, "I did not run for office to be helping out a bunch of, you know, fat-cat bankers on Wall Street."

Bert Ely, an independent banking analyst, said the description smacked of demagoguery. "This bank bashing is getting almost out of control," he said. "A lot of the small businesses that are crying for credit are, in many cases, not creditworthy."